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Abstract and Keywords

This article evaluates the institutions society uses to mitigate environmental externalities. A unified theory of environmental governance is reviewed, which determines the key players influencing environmental outcomes and their objectives, the institutions within which they interact, and the expected results of their interactions. It incorporates a number of key ideas from political science, and takes initial steps toward integrating non-governmental organizations (NGOs) into the overall theory. Environmental governance includes markets for green products and investments, regulatory relationships, and NGO/corporate engagements. Inducing compliance becomes increasingly difficult as the number of firms covered grows. A full theory of environmental governance must comprise interest-group politics and industrial organization. Markets increasingly provide incentives for companies to green themselves. The penetration of information technology into every crevice of modern life continues to change the set of strategies available to both activists and firms.

David P. Baron is David S. and Ann M. Barlow Professor of Political Economy and Strategy, Emeritus, Graduate School of Business, Stanford University.

Thomas P. Lyon

Thomas P. Lyon is Dow Professor of Sustainable Science, Technology and Commerce, with joint appointments in the Ross School of Business and the School of Natural Resources & Environment, University of Michigan. He also serves as Director of the Erb Institute for Global Sustainable Enterprise.

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